On July 30, 2009, Rand Logistics, Inc. delivered a letter to the board of directors of US Shipping General Partner LLC pursuant to which Rand proposed, as an alternative to US Shipping's existing proposed plan of reorganization, a transaction in which Rand would acquire certain assets, and assume certain
liabilities, of US Shipping. There can be no assurance that the US Shipping board of directors will entertain Rand's proposal or that any transaction between Rand and US Shipping will occur as a result of Rand's proposal. Furthermore, should a transaction between Rand and US Shipping result from Rand's proposal, there can be no assurance that the terms of any such transaction would be on terms consistent with those contained in Rand's proposal. A
copy of the letter containing Rand's proposal is attached hereto as Exhibit 99.1 and is incorporated by reference herein, and the foregoing is qualified by reference thereto.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS

Exhibits:

99.1 Letter to The Board of Directors of US Shipping General Partner LLC, dated July 30, 2009.

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

RAND LOGISTICS, INC.

Date: July 30, 2009

By:

/s/ Laurence S. Levy

Name:

Laurence S. Levy

Title:

Chairman of the Board and Chief Executive Officer

EX-99.1
2
e605689_ex99-1.htm
Unassociated Document

RAND
LOGISTICS, INC

RAND
LOGISTICS, INC

461
5th
AVENUE

25th
FLOOR

NEW
YORK, NEW YORK 10017

Telephone:(212)
644-3450

Facsimile:(212)
644-6262

July 30,
2009

The Board
of Directors of US Shipping General Partner LLC

c/o
Ronald O’Kelley

President
and Chief Operating Officer

U.S.
Shipping Partners L.P. and

US
Shipping General Partner LLC

399
Thornall St.

8th
Floor

Edison,
NJ 08837

Re:

U.S.
Shipping Partners, L.P. et al., (“Debtors”)

Chapter 11 case number
09-12711
(RDD)

Dear Mr.
O’Kelley:

I write on behalf of the Board of
Directors of Rand Logistics, Inc. (“Rand”) to propose, on a non-binding basis,
an alternative to the Debtors’ plan of reorganization dated July 10, 2009 (the
“Plan”) whereby Rand would acquire substantially all of the assets of the
Debtors for a combination of cash and debt issued by Rand. When combined with
the value of the assets retained by the Debtors, Rand’s proposal will deliver
over $255 million of value to the Debtors’ estate. We believe this
proposal delivers substantially higher value than the existing
Plan. We also believe that the combination of Rand and the Debtors’
businesses present a compelling combination and excellent strategic fit and, as
a result, will maximize recovery for the Debtors’ creditors. Given
the opportunity, we are confident that we will be able to expeditiously
negotiate a mutually acceptable alternative to the Plan, which could proceed
without causing significant delay to the resolution of the Debtors’ chapter 11
cases. Based on discussions with a significant percentage of the
Debtors’ senior and junior creditors, it is our opinion that these creditors
will find our alternative superior if given the unfettered opportunity to choose
between the existing Plan and Rand’s alternative proposal.

Rand is a publicly traded company
(NASDAQ: RLOG) and a leading provider of bulk freight shipping services
throughout the Great Lakes region. We are the only operator in the
Great Lakes region that provides domestic port-to-port services in both Canada
and the U.S., operating both U.S. flagged and Canadian flagged vessels in
compliance with the Jones Act in the U.S. and the Canadian Marine Act in
Canada. Rand owns a fleet of nine fresh water River Class
self-unloading carriers, two bulk carriers and one integrated self-unloading
tug/barge unit. Rand has a diverse customer base in the construction,
grain, integrated steel and electric utility industries, and serves a diverse
customer base, including LaFarge, Carmeuse, Anheuser Busch, Morton Salt, Bunge,
Essar Steel, and Koch Industries. As a result of a number of
successful operational initiatives and acquisitions that were implemented over
the last 12 months, for our fiscal year ended March 31, 2009 we achieved
significant growth in revenues and earnings.

The proposal outlined below is
consistent with the proposal we have previously described to your financial
advisors at Greenhill & Co. Given the importance of this
non-binding proposal to our shareholders and your creditors, we have decided to
make this letter public.

Summary
of Proposal

We propose to acquire substantially all
of the assets of the Debtors, including the ATB Freeport, ATB Galveston, ATB
Brownsville, ATB Corpus Christi, the Chemical Pioneer, the Charleston and the
Houston (collectively, the “Purchased Vessels”) plus all of the current assets
of the Debtors (excluding cash on hand). We would also assume the
Debtors’ contracts of affreightment and time charters, as well as accounts
payable, certain accrued expenses and other current liabilities of the Debtors
related to the purchased assets.

Rand would pay the following
consideration for the acquired assets:

·

$160
million in cash;

·

issuance
by Rand of $60 million in aggregate principal amount of senior notes, with
a six-year maturity and a cash interest rate of 10%, payable semi-annually
(the “New Rand Notes”); and

·

warrants
to purchase 750,000 shares of Rand common stock at an exercise price of
$8.00 per share and an expiration in August
2013.

In addition to the consideration paid
by Rand, the Debtors would retain assets with significant value (the “Retained
Assets”), consisting of:

·

the
Debtors’ cash on hand, which is projected to be $23.8 million at September
30, 2009;

·

the
ITB New York, the ITB Baltimore, the ITB Philadelphia, the ITB Mobile and
the Sea Venture (the “Retained Vessels”), which would be placed in a new
entity (“VesselCo”), with 100% of the equity of VesselCo issued to the
Debtors’ creditors; and

·

bare
boat charter contracts between VesselCo and Rand, providing for the
charter and management by Rand of each of the Retained Vessels, with each
vessel’s charter period ending when the vessel is sold or 30 days prior to
the vessel’s next scheduled
drydocking.

During the charter period, Rand would
actively market the Retained Vessels for sale on behalf of
VesselCo. The Retained Vessels have been valued at between $10.5
million and $13 million in the liquidation analysis included in the draft
Disclosure Statement.

Upon consummation of the transaction,
the purchased assets of the Debtors will be owned by a newly-formed, wholly
owned subsidiary of Rand (“New U.S. Shipping”). New U.S. Shipping
will have aggregate outstanding indebtedness at closing of approximately $135.0
million, as well as access to a $20.0 million revolving credit
facility. Rand’s existing lender will be providing this financing and
we believe the binding financing commitment can be negotiated prior to the
August 13, 2009 Disclosure Statement hearing.

To fund a portion of the cash
consideration, Rand plans to issue approximately $30 million of common
equity. Alternatively, Rand would be prepared to issue this common
stock directly to the creditors in lieu of all or a portion of the cash and note
consideration; we have confirmations from senior creditors who would take at
least one-third of the common equity required in lieu of cash and note
consideration. By electing to receive Rand’s common equity, the
Debtors’ creditors would be able to participate in the potential equity upside
of a less leveraged, more diverse publicly-traded Jones Act and Canadian Marine
Act company (as compared to the issuance under the Plan of equity of the holding
company for the Reorganized Debtors—a narrowly-focused, illiquid, privately held
company whose fleet size will be reduced by 40% over the next four years and
whose growth prospects will be severely limited due to its overleveraged balance
sheet). Any Rand common equity not taken up by Debtors’ creditors
would be issued to third parties. Rand has successfully funded past
acquisitions with equity proceeds and, based on discussions with our financial
advisor, Jefferies & Company, we are highly confident of our ability to
syndicate the equity necessary to fund this transaction.

Under the Rand proposal, New U.S.
Shipping will have substantially less leverage than is contemplated by the
Reorganized Debtors under the Plan and a more stable, less convoluted ownership
structure. Consequently, the long term viability of the enterprise
will not be in doubt and New U.S. Shipping will have significantly greater
flexibility to pursue long term strategic initiatives, including organic growth
and acquisitions. As a wholly owned subsidiary of Rand, New U.S.
Shipping stakeholders and employees will also benefit from the customer and
market diversity resulting from the combined company.

Analysis
of the Proposal

We have completed a comprehensive
review of the Plan and believe that the recoveries it describes for the Debtors’
creditors are built on unrealistic assumptions which would render the
Reorganized Debtors insolvent almost immediately upon
emergence. Thus, we believe that the Plan as currently drafted
presents significant issues of feasibility. Specifically, the Plan is
subject to the following serious risks, among others:

·

Risky Business
Mix: Over the last several years the Debtors have
transitioned away from highly predictable time charters, in which the
customer pays for the vessel whether it is in loaded condition or not,
toward less predictable contracts of affreightment, where the vessel
operator is exposed to changes in demand and operational risk, which may
result in lost vessel time. Given the inherent lack of
predictability in a contract of affreightment model versus a time charter
model, it introduces significant uncertainty into average fleet-wide
time-charter-equivalent and utilization rate assumptions. When
combined with the Reorganized Debtors’ high debt service obligations, this
less predictable business mix increases the likelihood of default and a
rapid return to bankruptcy.

·

Excessive
Leverage: By its terms, the Plan requires the
Reorganized Debtors to incur $300 million of indebtedness. With
projected EBITDA in 2010 of only $44.7 million, the Reorganized Debtors
would have debt equal to an extremely high 6.7x multiple of
EBITDA. In contrast, our analysis shows that comparable
companies are leveraged approximately 3.5x 2010 projected EBITDA, and the
enterprise valuations of comparable companies, including both debt and
equity, are less than 6.0x 2010 projected EBITDA. Furthermore,
2010 represents the peak year for the Reorganized Debtors’ projected
EBITDA, which is expected to decline to less than $38.0 million (and less
than $30.0 million, net of drydocking expenses) by
2013.

·

Fleet
Retirements: The Plan assumes that the Reorganized
Debtors are successful in generating $15.5 million of cash from several
vessels which will be retired over the next four years. Similar
to a significant number of other existing Jones Act vessels, this
equipment is being retired as a result of age and/or non-compliance with
the Oil Pollution Act of 1990. These regulatory pressures have
created a glut of vessels on the market, making sales difficult, as
evidenced by the Debtors’ failure to sell the vessels it has been
marketing this year. Nonetheless, the Plan assumes
approximately 20% of the cash flow sweeps through 2013 will come from
proceeds from these sales. Creditors should recognize the
highly speculative nature of these projected sales, and the resulting risk
to their projected cash recoveries.

·

Refinancing
Risk: The Plan is also predicated on a dramatic
improvement in the debt capital markets. For the Reorganized
Debtors to successfully refinance their debt in August 2013, they would
have to do so at leverage multiples well in excess of historically
acceptable levels for comparable shipping companies. As
discussed above, the projected leverage level at the maturity of the debt
to be issued under the Plan exceeds the average enterprise value multiples
of Jones Act shipping companies over the last ten years. Any
reliance placed on refinancing indebtedness at these levels is speculative
at best.

As a result of the above factors, we
believe the recovery to the Debtors’ creditors under the Rand proposal is not
only superior to the existing Plan but also involves substantially less risk to
the creditors. Based on our analysis of the Plan, we believe that the
likely recovery to first lien creditors is 61% of the face value of their
claim. This compares to a likely recovery of more than 70% of the
face value of the first lien creditors’ claims under the Rand proposal, with
approximately 75% of this recovery paid in risk-free cash and the remainder
received in the form of a senior note issued by Rand, with additional upside
potential from the common stock warrants issued by Rand and the proceeds of sale
of the Retained Vessels. Furthermore, from a credit perspective, the
notes issued by Rand will be significantly superior to the debt of the
Reorganized Debtors contemplated by the Plan.

As a result of this excessive leverage
and unsustainable capital structure, we anticipate the market will rapidly
inflict its judgment on the securities issued to the Debtors’ creditors under
the Plan. Based on a review of comparable indebtedness, we expect the
new senior secured notes contemplated by the Plan to trade at approximately 85%
of their face value, the new junior secured notes to trade at approximately
18.5% of their face value, and the new common equity of the Reorganized Debtors
to be essentially valueless. In sum, we believe the market will
ascribe an enterprise value of approximately $215 million to the Debtors if they
are reorganized in accordance with the existing Plan, consistent with the 61%
recovery we project.

Analysis of current trading levels in
the Debtors’ first lien debt only strengthens these
conclusions. Since the filing of the Plan, which provided investors
complete transparency regarding the nature and amount of their anticipated
recoveries, the first lien senior secured debt has traded at approximately 50%
of face value, implying an enterprise valuation of less than $180
million. This suggests that even our own estimate of a 61% recovery
for the first lien creditors under the Plan may be drastically
overstated.

In contrast, Rand’s alternative
proposal offers the Debtors’ creditors a total recovery of more than
$255 million, and provides New U.S. Shipping with the capital structure it
needs to succeed. Creditors will have the opportunity to share in the
upside of New U.S. Shipping’s success through the warrants issued by Rand and,
if they so desire, through the issuance of Rand common stock. In
addition, the creditors’ risk will be substantially reduced, with approximately
75% of the total recovery delivered to the Debtors’ creditors in the form of
cash.

Process

While we believe Rand’s alternative
proposal brings real additional value to the Debtors’ creditors, we are also
sensitive to the creditors’ desire for an expeditious exit from
bankruptcy. As a result, we have discussed with our advisors how to
implement our proposal with the least disruption to the existing
timetable.

To that end, we envision that the
Debtors would modify their existing Disclosure Statement and Plan to provide
creditors with the alternative of the Rand proposal. We believe that
proceeding in this manner would cause minimal delay and expense to the Debtors’
estate.

Based on the foregoing we believe that
the Debtors’ Board, in order to comply with its fiduciary duties to all
creditors, should (i) immediately commence negotiations with Rand regarding its
proposal; (ii) disclose this offer to the Secured Parties (as defined in the
Plan Support Agreement) and (iii) upon the Board’s satisfaction with Rand’s
ability to consummate a transaction, terminate the Debtors’ obligations under
the Plan Support Agreement, and proceed on a dual track with alternative
plans. Furthermore, in light of the substantial changes to the
structure of the Debtors’ plan of reorganization from the time the Plan Support
Agreement was signed to today, we believe it is incumbent upon the Debtors’
Board to release the Secured Parties from their obligations under the Plan
Support Agreement immediately in order to permit the bankruptcy process to work
effectively and deliver maximum recovery to the creditors.

For the reasons outlined above, we
believe Rand’s proposal is clearly a superior alternative to the
Plan. We and our financial and legal advisors are prepared to move
forward immediately. We have discussed this proposal with our Board
of Directors and they are fully supportive. We believe that our
proposal presents a compelling opportunity for both our companies and our
respective constituents, and we look forward to your prompt
response. We respectfully request that the Board of US Shipping
General Partner LLC reach a determination by 5:00 p.m., New York time, on August
3, 2009 whether to proceed with negotiating an amendment to the Disclosure
Statement to permit the Debtors’ creditors the option to consider Rand’s
alternative proposal.

We reserve the right to withdraw this
proposal at any time prior to the entry into a binding agreement regarding the
transaction.